Berkeley wants to use cryptocurrency to help house its homeless

In search of cash to help alleviate an intensifying homeless crisis, city officials here are considering a radical, and very Silicon Valley option — a cryptocurrency fundraiser.

Berkeley leaders are drafting a proposal that could make it the first U.S. city to launch an initial coin offering, or ICO — a digital token offering that is a popular fundraising tool for some Silicon Valley tech startups. The city could use that money for various projects, but affordable housing and services for the city’s homeless would be top priorities.

“We have more than 1,000 homeless people, and we see funding drying up,” said Councilman Ben Bartlett, who is spearheading the effort. “So we have to do something.”

Business Insider first reported Berkeley’s ICO aspirations.

Bartlett is working with UC Berkeley’s Blockchain Lab and financial tech startup Neighborly to develop a plan for the unusual ICO. For now, details on the offering are scant, and the group doesn’t plan to unveil its proposal until May. But the general idea is that investors would use blockchain — the digital ledger that facilitates currencies such as Bitcoin — to buy digital tokens backed by municipal bonds. The tokens could be used as vouchers in local stores, Bartlett said.

“The technology allows for a speedier delivery, cheaper rate, more flexibility,” he said. “It could be one block getting some trees. Or one ambulance.”

ICOs have taken the Bay Area, and the world, by storm over the past year, nabbing endorsements from celebrities ranging from Paris Hilton to Floyd Mayweather and raising $3.7 billion to date, according to CoinSchedule, which tracks ICOs. But the offerings, mostly used by blockchain technology companies, have drawn scrutiny from the Securities and Exchange Commission in recent months as questionable offers abound. The SEC formed a new “cyber unit” which filed its first charges against an alleged ICO fraudster in December.

But Berkeley’s ICO would be different from the typical tech offering. For one thing, the value of the tokens Berkeley sells wouldn’t go up and down the way coins like Bitcoin, the most famous cryptocurrency, fluctuate wildly. Bitcoin soared 1,822 percent between February and December of last year, before plunging 62 percent this month. Berkeley’s coin would be a more stable investment, as are bonds, Bartlett said.

Berkeley is partnering with Neighborly, a San Francisco-based startup that helps residents invest directly in city projects they care about. Berkeley’s ICO would be a debut of new technology Neighborly has been developing to make “cryptobonds” possible.

“Berkeley is blazing an exciting trail,” Kiran Jain, Neighborly’s chief operating officer, wrote in an email. “Given their history, that should not come as a surprise.”

Bartlett sees a Berkeley ICO as a way to help the city provide housing for its most vulnerable citizens. Berkeley had 972 homeless residents last year — up from 680 in 2009, according to the city’s count.

“We’re at crisis levels, and it’s going to get worse,” Bartlett said.

The problem is intensifying as Berkeley’s funding is being threatened. The Republican tax overhaul, which lowered corporate tax rates late last year, also lowered the value of the tax credits cities use to fund affordable housing projects.

“The status quo is just not going to work anymore. It just won’t,” Bartlett said. “So bring it on. Bring on the innovation, because we need it.”